Herbalife Ltd. (HLF) Q4 Preliminary Profit Tops Expectations

Herbalife Ltd. (NYSE:HLF) announced its preliminary results for the fourth quarter; the earnings were above its prior expectations.

Despite encouraging financials, the company’s shares were under pressure in premarket trading, reflecting investor’s anger over the pace of the buyback. The company also revealed, today, that it expects to start repurchasing shares under its existing share-repurchase authorization.

For the full year, the nutritional-supplement maker expects earnings per share of $4.02 to $4.05, a revenue growth of 18 percent to 20 percent. Earlier in October, the company predicted its per-share earnings to be between 3.99 to $4.03, a revenue growth of 16 percent to 18 percent.

For the fourth quarter, the nutritional-supplement maker expects earnings per share of between $1.02 and $1.05, with revenue growth similar to that of the full year. Herbalife Ltd. (NYSE:HLF) earlier estimated its per-share earnings to be between 97 cents to $1.01, a revenue growth of 17 percent to 19 percent.

“Since 1980, Herbalife has helped people pursue an active, healthy lifestyle and today [it] is a global nutrition company that utilizes a direct selling network of independent distributors focused on creating loyal customers,” said Michael O. Johnson, Herbalife’s Chairman and CEO.

“Herbalife is a financially strong and successful company, having created significant opportunities for distributors and positively impacted the lives and health of our consumers over our long history.”

Johnson continued, “Over the twelve months ended September 30, 2012, Herbalife Ltd. (NYSE:HLF) has generated more than $700 million in EBITDA1 – which does not yet include [its] fourth quarter results – has returned approximately $1.9 billion in capital to shareholders since 2007, and has a strong balance sheet. We are as confident as ever in the future of Herbalife and remain fully committed to complete transparency and defending our successful business model and track record for the benefit of all stakeholders.”

Herbalife Ltd. (NYSE:HLF) has been accused of following a business model similar to that of a pyramid scheme and is involved in a public battle with a hedge fund. Last week, in an investor meeting, the company explained its direct-selling model, which includes selling of the company’s products by individuals who are given incentives to recruit new sellers.

Pershing Square Capital Management LP’s William Ackman, alleged that the company profits more by recruiting other distributors than by selling products to consumers. However, the nutritional-supplement firm clams it has a legitimate business and real customers. In yet another twist, activist investor Carl Icahn this week disclosed he has bought a “small” position in the company.

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Aman has an MBA in Finance, and loves to write and research stocks.
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